Time for a Deeper Farm Safety Net Discussion?

The bill to be presented next week by Majority Leader Harry Reid (D-NV) would delay sequestration (scheduled to take effect March 1) until next year, in hopes that in the meantime a mega budget deal can be reached between the White House and Congress. To replace the automatic across the board cuts, Reid proposed to cut the deficit by $110 billion, half through closing tax loopholes and half through spending cuts. The spending cuts would be shared 50-50 between the farm bill and the Pentagon.

Senate Agriculture Committee Chair Debbie Stabenow, in defending the package, noted that the $27.5 billion in net cuts to the farm bill, all of which come from terminated out-dated direct production subsidies, would be the totality of what the next farm bill would need to cut from mandatory spending. In other words, the farm bill’s contribution will have been paid in full if the Reid proposal were to become law.

Much of the reaction to the proposal from other members of Congress and from agricultural groups has been not to rush to the defense of direct payments, but rather to say, in various ways, that a big chunk of the money represented by direct payments is needed to pay for new commodity and crop insurance subsidies to take the place of direct payments. Thus, in this view, simply eliminating direct payments without replacing them would kill any chance of getting a new farm bill done.

There are many aspects to this emerging debate, but at least one way to look at it is simply by the numbers.

With no change in current law, farm subsidies (commodity plus crop insurance subsidies combined) are estimated by the Congressional Budget Office to total $155 billion over the coming decade. In 2012, both the House and Senate Agriculture Committees wrote new farm bills that reduced that total expenditure to $140 billion, including the total elimination of direct payments plus two competing versions of replacement programs. So, in other words and to oversimplify a bit, the Committees said we can have a new farm safety net that costs $14 billion a year instead of $15.5 billion a year under the old safety net.

The Reid proposal, by contrast, would cut the $155 billion over 10 years to $127.5 billion over 10 years, or just a bit under $13 billion a year for the farm safety net.

To the outside observer, this $14 billion a year to $13 billion a year change may appear to be a fairly small. In fact, many a big town paper editorial board would no doubt compete in a race to be the first to charge that there is little difference between the two and declare it a fiscal scandal either way.

However, within agriculture circles, it may appear to be a huge change and an insurmountable challenge.

In the academic community, a different question might be asked: if we were starting from scratch, could a decent, modern, equitable safety net be designed that would cost $13 billion a year? How about $12 billion? Or $10 or $11 billion? If so, what would it look like?

But in the policy world, you never get to start from scratch, but you do at least occasionally get to ask some fundamental questions. With a new farm bill temporarily on hold while we go through the next three man-made fiscal battles over sequestration, a continuing resolution, and the debt ceiling, now is not a bad time to get those questions on the table. Questions such as —

Should we subsidize every last acre on every last farm now matter how big the farm, no matter how wealthy the owner, no matter if the beneficiary is a Wall Street investor or an actual working farmer, and no matter how much the subsidy further concentrates agricultural assets and wealth?

Should we consider it written in stone that farmers should have insurance options in which the taxpayer covers as much as 80 percent of the premium, or is 75 percent or 70 percent sufficiently generous as a top limit?

Is it good public policy to effectively guarantee, on the taxpayer’s dime, high returns to private crop insurance companies without effective competition?

Is it not such a great idea to have both commodity title and crop insurance title program options to cover part of the insurance deductible, or is such built-in redundancy actually important to cover different types of agriculture or different types of risk?

Is it good public policy to continue to offer subsidized insurance so investors can break out brand new cropland from our shrinking pool of native grasslands, land that more often than not is marginal enough for crop production that it guarantees high future insurance payouts?

How far should a new farm bill go to create risk management and insurance options for all of agriculture, or is it not actually a major public policy issue at this point in time for the vast majority of support to go to the small handful of major commodity grain, feed, and fiber crops?

Should well established, financially secure farms get the same insurance premium subsidy as new, young and beginning farmers? Should organic farmers be forced to continue to pay more for crop insurance even while getting payments in case of a disaster at lower conventional market prices? And so on.

One of the problems with the crop insurance and shallow loss debates from the first two rounds on the new farm bill (the 2011 super committee round and the 2012 regular order round) was the lack of interest, with limited exceptions, to delve very far into questions such as these. In our view, now is a good time to have a deeper discussion, and it may well be wiser for agriculture to get behind significant changes in the direction of real reform (and a bit more deficit reduction) than to circle the wagons and let change happen by way of popular — though perhaps less practical — floor amendments or budget cliff deals.

One response to “Time for a Deeper Farm Safety Net Discussion?”

Conservation compliance was not mentioned in the article above. It needs to be tied to subsidized crop insurance in order to protect wetlands, native prairie and highly erodable land. With the reduction in commodity subsidies, there is less incentive to stay in compliance now.